Final Results

RNS Number : 5845T

M. P. Evans Group PLC

21 March 2023

 

M.P. EVANS GROUP PLC

M.P.Evans Group PLC ("MP Evans", "the Group" or "the Company"), producer of sustainable Indonesian palm oil, announces its results for the year ended 31 December 2022.

The Group's 2022 annual report is available on its website at www.mpevans.co.uk .

Highlights

Financial

− Gross profit for the year up by 5% to US$109.2 million (2021 US$103.6 million)

− Operating profit down by 11%* to US$101.6 million (2021 US$114.6 million)

− Average mill-gate price for Group crude palm oil ("CPO") up by 5% to US$854 per tonne (2021 US$810 per tonne)

− Sustainability premia increased to US$7.5 million (2021 US$4.3 million)

− Operating cash generation up by 21% to US$132.2 million (2021 US$109.2 million)

− Net cash at year end US$33.5 million (2021 net debt of US$5.4 million)

− Basic EPS down by 7%* to 108.0 pence (2021 - 115.6 pence)

− 21% increase in normal dividend for the year to 42.5p per share (2021 - 35p per share) with proposed final dividend of 30p per share (2021 final dividend 25p per share)

*2021 results benefited from one-off gain on land sale of US$13.9 million

Operational

− Total crop processed up 11% to 1.5 million tonnes

− 100% of Group and scheme-smallholder crop grown to sustainability standards

− 64% of total output currently certified sustainable, up from 55% in 2021

− Group crops up to 905,000 tonnes, a 12% increase

− Planting at youngest estate, Musi Rawas, approaching 10,000-hectare target

− Crude-palm-oil production up 9% to 342,000 tonnes

Post year end

− Group's sixth palm-oil mill, at Musi Rawas, started production in February 2023

− Further 2,100 planted hectares acquired close to Simpang Kiri estate in March 2023

Commenting on the results, Peter Hadsley-Chaplin, executive chairman of MP Evans , said: "The Group has produced another set of excellent operational and financial results. Crop and production have increased once again and, as we celebrate our 150-year anniversary, we have also reached the milestone of processing 1.5 million tonnes of fresh fruit bunches. The Group remains focused on long-term and sustainable growth, and has both acquired further planted hectarage and started production at another Group palm-oil mill since the end of the year.

Profit and cash generation have remained strong, the Group has eliminated net debt, and now has net funds in place to support continued investment and shareholder returns. The board is recommending a final dividend of 30p per share, bringing total dividends for the year to 42.5p per share, up more than 20% from the 35p normal dividends paid in respect of the previous year, and a further step forward in the Group's long-standing progressive dividend policy."

Enquiries:

M.P. Evans Group PLC	[phone] on 21 March 2023 only
	Thereafter [phone]
Peter Hadsley-Chaplin, Chairman
Matthew Coulson, Chief executive
Luke Shaw, Chief financial officer
Peel Hunt LLP (Nomad and joint broker)	[phone]
Dan Webster, Andrew Clark, Lalit Bose
finnCap (Joint broker)	[phone]
Tim Redfern, Harriet Ward
Hudson Sandler (Financial PR)	[phone]
Charlie Jack, Francis Kerrigan, Amelia Craddock

An analysts' meeting will be held today at 9.30am at the offices of Hudson Sandler, 25 Charterhouse Square, London EC1M 6AE, 020 7796 4133.

Results

The Group achieved a gross profit of US$109.2 million, higher than the US$103.6 million recorded in 2021, representing an all-time record. Average palm-oil prices were particularly strong once again in 2022 and these, combined with an increase in production, offset some inflationary cost pressures, most notable in the fertiliser inputs required to maintain healthy and productive palms across our estates. Earnings per share were 108.0p, a little lower than the 115.6p in 2021, which benefited from the one-off profit of US$13.9 million from the sale of non-core land in Malaysia. The Group has continued to be significantly cash generative, with net operating cash generated of US$102.3 million in the year, enabling the Group to continue with capital investment, eliminate net debt, and prioritise progressive shareholder returns.

Dividend

An interim dividend of 12.5p per share (2021 - 10p per share) was paid on 4 November 2022, and the board is recommending a final dividend of 30p per share (2021 - 25p per share). This represents another year of increasing normal dividends, up by 7.5p from 2021, and a substantial increase of 93% from the amount paid two years ago.

Dividends have accelerated in recent years as the Group's operational cash flows have strengthened due to the increasing maturity of the Group's operations. The Group has an unbroken track record, spanning more than thirty years, of maintaining or increasing dividends, and the anticipated trend of increasing crop and production forms a sound basis for further dividend increases.

150-year anniversary

During 2023 the Group is proud to be marking its 150-year anniversary, having traced its origins back to the early 1870s. The Group is holding several celebratory events, both in Indonesia and in the UK during the year, including an AGM at Mansion House in London followed by a celebratory lunch, to which shareholders are invited. Places for the lunch are limited and registration is required. Further information is included in the investor pages of the Group's website.

Palm-oil market

CPO prices were at historically high levels in the first half of 2022, reaching a peak of almost US$2,000 per tonne cif Rotterdam following the outbreak of war between Ukraine and Russia, and concern over reductions in sunflower oil supplies from Ukraine. Pricing moderated somewhat in the second half of the year, but palm oil was attractive given the, at times, wide discount to soya oil of up to US$400 per tonne. The Group does not receive the full benefit of the high quoted CPO prices. Its net mill-gate price is received on a tender basis, which is after adjustments to take account of the Indonesian export tax and levy, as well as transport and insurance costs. Over the course of 2022, the average mill-gate price received for the Group's CPO was US$854 per tonne, 5% higher than the US$810 per tonne in 2021.

Prices for palm kernels also increased in 2022, particularly in the early part of the year, following a similar pattern to CPO pricing. The Group's palm kernels sold for an average price of US$611 per tonne in the year, 15% higher than the US$533 per tonne in 2021.

Strategic developments

During 2022, the Group continued to execute its principal activity, being the responsible ownership, management and development of sustainable oil-palm estates in Indonesia. Alongside its own projects, the Group also manages and develops scheme-smallholder areas attached to those estates. The Group's objective is to continue increasing both its own crop and that from its scheme smallholders, whilst also increasing its own milling capacity, thereby increasing its output of certified sustainable palm oil. As Group areas mature, its strategy is to increase the planted hectarage controlled by it. Milling its own crop and that of its scheme smallholders in its own mills enables the Group to deploy its operational expertise to greatest effect with the aim of generating stronger returns, allowing shareholders to receive sustained increases in dividends.

Throughout the course of 2022, the Group had five operational palm-oil mills, with a sixth under construction at Musi Rawas. The mill at Musi Rawas opened in February 2023 and will now process all of the crop from that estate and start to take in additional crop from independent suppliers to maximise its utilisation. All the Group's palm-oil mills are accredited as certified sustainable producers as soon as possible after commissioning, although it can take time to complete the necessary independent audit and approval checks. All of the Group's ffb, and that of its scheme smallholders, are grown to the same high standards and in a sustainable way.

Following the year end, the Group has been successful in acquiring an additional 2,100 planted hectares close to its estate at Simpang Kiri in Aceh Province in northern Sumatra. This is in line with the Group's strategy of continuing to increase its planted area through the acquisition of further hectarage, initially within the vicinity of its existing projects. It is likely that, in time, the Group will build a further palm-oil mill to process the fruit from this enlarged estate. After the acquisition at Simpang Kiri, the Group remains committed to its growth strategy, and a number of further projects remain under review.

Sustainability

The Group is committed to the production of certified sustainable palm oil, and sustainability is at the core of its strategic and operational decision-making. All the Group's estates are developed and managed sustainably, but independent certification enabling the sale of the Group's production as sustainable palm oil is awarded to the Group's mills. Certified sustainable sales rose significantly in 2022 to almost two thirds of the total, an increase of approximately 50,000 tonnes from the previous year. As the Group continues to grow, by adding milling capacity, maximising the yield from its existing areas and seeking additional sustainably managed areas to provide further Group crop for those mills, its ambition is to continue elevating its sustainable output towards 100%.

The Group received sustainability premia of US$7.5 million (2021 US$4.3 million), another increase reflecting both the demand for certified sustainable production and the Group's ability to deliver more of its own certified output. CPO and palm kernels ("PK") are sold with both RSPO and ISCC certifications depending on demand and where the best premia can be achieved. The average premia for CPO when sold as certified oil was US$16.90 per tonne (2021 US$17.40), whilst demand for sustainable PK was particularly strong in 2022 following high demand for sustainably sourced cosmetic products, with average premia for PK sold as certified up to US$91.80 per tonne (2021 US$55.20).

Operational developments

The total crop processed by the Group increased in the year to 1,511,700 tonnes (2021 - 1,366,200 tonnes), an overall increase of 11%. This was in line with the Group's growth plans, and a result of both the long-term investment made by the Group in Indonesian oil palm and the commitment to operational excellence by the Group's agronomic management teams.

	2022	Increase/ (decrease)	2021
	Tonnes	%	Tonnes
Crop
Own crops
Kota Bangun	219,400	13	194,300
Bangka	167,200	10	152,300
Pangkatan group	192,500	8	179,000
Bumi Mas	166,700	1	165,700
Musi Rawas	107,600	55	69,400
Simpang Kiri	52,000	6	49,000
	905,400	12	809,700
Scheme-smallholder crops
Kota Bangun	91,000	5	86,300
Bangka	91,200	13	80,800
Pangkatan group	900	-	-
Bumi Mas	30,600	2	29,900
Musi Rawas	52,000	61	32,300
	265,700	16	229,300
Independent crop purchased
Kota Bangun	191,700	(9)	210,600
Bangka	62,800	(20)	78,200
Pangkatan group	39,100	9	35,900
Bumi Mas	47,000	1,780	2,500
	340,600	4	327,200
Total crop	1,511,700	11	1,366,200

The Group is committed to increasing its CPO and PK production capacity as much as possible. The Group's crops and those of its scheme smallholders are of a high standard, and the Group seeks to maximise the margins available to it by milling that crop and selling the oil and kernels for itself. With the benefit of having five Group mills operational throughout the year, total CPO production increased by 9% to 341,700 tonnes, and PK production was up by 10% to 73,800 tonnes.

		Increase/
	2022	(decrease)	2021
Production	Tonnes	%	Tonnes
Crude palm oil
Kota Bangun	112,800	(1)	114,400
Bangka	75,100	1	74,200
Pangkatan group	53,300	10	48,600
Bumi Mas with mill	56,200	170	20,800
	297,400	15	258,000
Bumi Mas pre mill	-	-	23,100
Musi Rawas	32,600	57	20,800
Simpang Kiri	11,700	6	11,000
	44,300	(19)	54,900
	341,700	9	312,900
Palm kernels
Kota Bangun	23,800	5	22,700
Bangka	18,400	3	17,800
Pangkatan group	12,200	8	11,300
Bumi Mas with mill	9,600	182	3,400
	64,000	16	55,200
Bumi Mas pre mill	-	-	5,000
Musi Rawas	7,500	60	4,700
Simpang Kiri	2,300	5	2,200
	9,800	(18)	11,900
	73,800	10	67,100
Extraction rates	%	%	%
Crude palm oil
Kota Bangun - Bumi Permai	23.2	(2)	23.8
Kota Bangun - Rahayu	21.2	(6)	22.5
Bangka	23.4	(2)	23.8
Pangkatan group	22.9	1	22.6
Bumi Mas	23.0	1	22.8
	22.9	(2)	23.3
Bumi Mas	-	-	21.6
Musi Rawas	20.4	-	20.4
Simpang Kiri	22.5	-	22.5
Palm kernels
Kota Bangun - Bumi Permai	5.1	4	4.9
Kota Bangun - Rahayu	4.2	-	4.2
Bangka	5.7	-	5.7
Pangkatan group	5.2	(2)	5.3
Bumi Mas	3.9	5	3.7
	4.9	(2)	5.0
Bumi Mas	-	-	4.7
Musi Rawas	4.67	2	4.6
Simpang Kiri	4.5	-	4.5

At Musi Rawas, planting continued throughout 2022. All planting is performed in compliance with the environmental standards published by the RSPO. The Group planted 585 hectares at Musi Rawas in 2022, bringing the total planted area there to 9,600 hectares, and the Group expects to achieve its initial target of achieving a total planted area of 10,000 hectares during 2023.

In North Sumatra and Aceh, the Group has made significant progress during the year on the formation of new co-operative schemes and financing replanting of areas of oil palm for members of those schemes. By the end of 2022, a total of 1,147 hectares had been replanted as part of these schemes, both at Pangkatan and Simpang Kiri. In addition, 64 hectares of the Group's own oil palm were replanted at Pangkatan during the year.

At the end of 2022, the Group managed 54,100 hectares of planted oil palm from its own and associated scheme-smallholder areas, 93% of which were mature and in harvest, and the average yield per mature planted hectare had increased to 23 tonnes.

Group valuation

An independent valuation of the Group's plantations was performed at the end of the year, valuing the Group's planted areas at an average of US$20,700 per hectare. After allowing for other Group assets and liabilities, this equity value per share had increased during the year to £14.98 per share. The Group did benefit, in sterling terms, from a weaker year-end exchange rate when compared to the position at the end of 2021, accounting for £1.58 of the increase.

Current trading and prospects

The Group has made a positive start to 2023, and total crop processed in the first two months of the year was 213,000 tonnes, 8% higher than in the first two months of 2022. The benefits of the significant investment made by the Group in its Indonesian estates continue to be felt, and, barring any unforeseen circumstances, the long-term trend of increasing crop is expected to continue as the Group moves further into 2023. The new mill at Musi Rawas began processing Group crop in February 2023, and after a short period of stabilisation, will soon start to take in crop from outside suppliers, only adding further to the Group's ability to process crop and increase production.

	2 months ended	Increase/	2 months ended
	28 February 2023	(decrease)	28 February 2022
	Tonnes	%	Tonnes
Own crops	116,300	(1)	116,900
Smallholder crop	35,100	-	35,000
Outside crop purchased	61,300	38	44,300
	212,700	8	196,200

CPO pricing remained stable in the early part of 2023, and the Group enjoyed mill-gate prices in a relatively narrow band around US$750 per tonne, similar to those achieved in the latter part of 2022, although sales prices have increased above US$800 per tonne for recent contracts. Whilst these are lower than the unusually high prices seen in the early part of 2022, the Group remains confident that, at these price levels, it will be able to deliver further significant profits and cash generation.

Since the year end, the Group has announced the acquisition of 2,100 planted hectares close to its Simpang Kiri project in Aceh Province, northern Sumatra, bringing the total planted area, including that of associated scheme smallholders, to 4,800 hectares. Although the existing area at Simpang Kiri has been both highly productive and profitable for many years, it has not been worthwhile to construct our own mill there, and Group crop has been sent for outside processing. Whilst some of the newly acquired hectarage will require a certain amount of replanting and rehabilitation, as crop from the combined area increases, this is likely, in time, to warrant the construction of an additional Group mill. At that point all of the Group's estates would have their own mills.

Palm oil continues to be, by volume of supply and consumption, the largest of the vegetable oils produced globally and of the major vegetable oils is the most efficient to produce when measured by tonnes of oil per hectare of land. The board is of the belief that sustainably produced palm oil will continue to be in demand for the foreseeable future, and that Group prospects therefore remain positive.

Peter Hadsley-Chaplin

Chairman

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2022

	2022	2021
	US$'000	US$'000
Continuing operations
Revenue	326,917	276,592
Cost of sales	(217,707)	(172,979)
Gross profit	109,210	103,613
(Loss)/gain on biological assets	(1,431)	1,771
Profit on sale of land	-	13,946
Foreign-exchange loss	(3,444)	(820)
Other administrative expenses	(4,614)	(5,380)
Other income	1,865	1,426
Operating profit	101,586	114,556
Finance income	1,395	645
Finance costs	(2,731)	(2,699)
Profit before tax	100,250	112,502
Tax on profit on ordinary activities	(24,073)	(23,228)
Profit after tax	76,177	89,274
Share of associated companies' profit after tax	2,184	2,508
Profit for the year	78,361	91,782
Attributable to:
Owners of M.P. Evans Group PLC	73,060	86,406
Non-controlling interests	5,301	5,376
	78,361	91,782
	US cents	US cents
Continuing operations
Basic earnings per 10p share	133.9	158.4
Diluted earnings per 10p share	133.4	157.9
	Pence	Pence
Basic earnings per 10p share
Continuing operations	108.0	115.6

CONSOLIDATED BALANCE SHEET

As at 31 December 2022

Company number: 1555042
	2022	2021
	US$'000	US$'000
Non-current assets
Goodwill	11,767	11,767
Other intangible assets	1,167	1,222
Property, plant and equipment	411,658	401,005
Investments in associates	11,795	13,242
Investments	61	65
Deferred-tax asset	989	3,602
Trade and other receivables	9,146	16,618
	446,583	447,521
Current assets
Biological assets	3,089	4,520
Inventories	23,112	21,754
Trade and other receivables	32,681	41,892
Current-tax asset	2,290	2,522
Cash and cash equivalents	82,503	65,609
	143,675	136,297
Total assets	590,258	583,818
Current liabilities
Borrowings	17,364	20,531
Trade and other payables	24,410	31,200
Current-tax liability	4,455	12,219
	46,229	63,950
Net current assets	97,446	72,347
Non-current liabilities
Borrowings	31,675	50,517
Deferred-tax liability	13,538	11,417
Retirement-benefit obligations	9,972	12,886
	55,185	74,820
Total liabilities	101,414	138,770
Net assets	488,844	445,048
Equity
Share capital	9,179	9,232
Other reserves	54,543	55,467
Retained earnings	407,460	366,825
Equity attributable to the owners of
M.P. Evans Group PLC	471,182	431,524
Non-controlling interests	17,662	13,524
Total equity	488,844	445,048

CONSOLIDATED CASH-FLOW STATEMENT

For the year ended 31 December 2022

	2022	2021
	US$'000	US$'000
Net cash generated by operating activities	102,288	92,272
Investing activities
Purchase of property, plant and equipment	(33,714)	(32,510)
Purchase of intangible assets	(116)	(8)
Interest received	622	316
Decrease in bank deposits treated as current-asset
investments	-	334
Decrease in receivables from smallholder co-operatives	1,714	17,630
Proceeds on disposal of property, plant and equipment	3,055	15,125
Net cash (used by)/from investing activities	(28,439)	887
Financing activities
Repayment of borrowings	(22,009)	(34,636)
Lease liability payments	(38)	(218)
Dividends paid to Company shareholders	(28,500)	(20,527)
Dividends paid to non-controlling interest	(124)	(164)
Issue of Company shares	191	827
Buyback of Company shares	(4,902)	-
Net cash used by financing activities	(55,382)	(54,718)
Net increase in cash and cash equivalents	18,467	38,441
Net cash and cash equivalents at 1 January	65,609	27,222
Effect of foreign-exchange rates on cash and cash
equivalents	(1,573)	(54)
Cash and cash equivalents at 31 December	82,503	65,609

Notes

1.  Dividends paid and proposed

	US$'000	US$'000
2022 interim dividend - 12.5p per 10p share (2021 interim dividend 10p)	7,611	7,377
2021 special dividend - 5p per 10p share	3,662	-
2021 final dividend - 25p per 10p share (2020 final dividend 17p)	17,227	13,150
	28,500	20,527

Following the year end, the board has proposed a final dividend for 2022 of 30p per 10p share, amounting to US$19.4 million.

	2022	2021
Ex-dividend date	27 April 2022	28 April 2022
Record date	28 April 2022	29 April 2022
Dividend payable on or after	16 June 2022	17 June 2022

2.  Basic and diluted earnings per share

The calculation of earnings per 10p share is based on:-

		2022		2021
	2022	Number	2021	Number
	US$'000	of shares	US$'000	of shares
Profit for the year attributable to the owners
of M.P. Evans Group PLC	73,060		86,406
Average number of shares in issue		54,579,591		54,564,864
Diluted average number of shares in issue*		54,754,110		54,710,139

*The difference between the number of shares in issue and the diluted number of shares relates to unexercised share options held by directors and key employees of the Group.

3.  Financial information

The financial information has been derived from the Company's audited accounts but does not itself constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the financial year ended 31 December 2022 have been reported on by the Group's auditors, BDO LLP, and will be filed with the Registrar of Companies. The report of the auditors thereon was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, nor did it contain any matters to which the auditors drew attention without qualifying their audit report.

4.  International Accounting Standards

This announcement is based on the Group's financial statements which were prepared in accordance with UK-adopted International Accounting Standards.

5.  Distribution timetable

The Group's 2022 annual report is available on the Group's website and will be despatched to shareholders on or before 31 March 2023. Printed copies of the Group's 2022 annual report will be available from the Company, 3 Clanricarde Gardens, Tunbridge Wells, Kent TN1 1HQ. The annual general meeting will be held on Friday 9 June 2023.

By order of the board

Katya Merrick

Company secretary

 

END

 

 

FR JMMRTMTATBMJ